(Bloomberg) -- U.S. equity markets should prepare for more turbulence as the 2020 presidential election draws near, according to Kevin Russell, chief investment officer of UBS O’Connor, the $5.1 billion hedge fund unit at UBS Group AG.
“We expect peak anxiety is going to hit in the spring,” Russell said Monday at a briefing at UBS’s New York office. “The very clear ground zero for anxiety around the election, particularly the Democratic agenda, has been the health-care space.”
That and the financial-services sector are “two very obvious targets of some of the Democratic candidates, and will probably experience a little bit more volatility,” he said.
Election-related risks could weigh on U.S. equities and the dollar, while buoying non-U.S. stocks, according to Evan Brown, the head of multi-asset strategy at UBS’s asset-management business. He also expects the U.S. yield curve to steepen as the global economy strengthens.
“Headlines around the U.S. presidential election and potentially dramatic changes in U.S. economic policy will likely prompt bouts of volatility that may disadvantage U.S. equities over their international peers,” the asset-management arm said in a report.
Russell expects investors to shift to European equities while the U.S. political environment remains uncertain. He joins a subset of hedge fund managers preparing for disruption from the elections, with some already factoring in the possibility of Senator Elizabeth Warren climbing up the polls. Scott Bessent has shorted the dollar at his Key Square Capital Management at the “mere threat” of her presidency, according to a November letter to investors.
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